In a landmark ruling, the Supreme Court of India has clarified that an offence under Section 138 of the Negotiable Instruments Act, 1881, which deals with cheque dishonor cases, can only be compounded with the explicit consent of the complainant, even if the accused is willing to settle the matter. The decision, delivered by a bench comprising Justice C.T. Ravikumar and Justice Sanjay Karol, overruled a Delhi High Court judgment that had compounded an offence under Section 138 without the complainant’s consent. This ruling is significant as it reinforces the necessity of the complainant’s agreement in cases involving dishonored cheques, thereby ensuring that their interests are adequately protected under the law.
The case in question, A.S. Pharma Pvt. Ltd. vs. Nayati Medical Pvt. Ltd. & Ors., arose from a dispute over the dishonor of cheques and the subsequent legal proceedings initiated by the complainant. The Supreme Court’s judgment now sets a clear precedent regarding the mandatory requirement of consent for compounding offences under the N.I. Act, emphasizing the balance between the rights of the accused and the interests of the complainant.
Background of the Case
The Supreme Court of India has ruled that an offence under Section 138 of the Negotiable Instruments Act, 1881 (N.I. Act), which deals with dishonor of cheques, can only be compounded under Section 147 of the same Act with the explicit consent of the complainant. The decision was delivered in the case of A.S. Pharma Pvt. Ltd. vs. Nayati Medical Pvt. Ltd. & Ors. [Criminal Appeal Nos. 3051-3052 of 2024], wherein the appellant, A.S. Pharma Pvt. Ltd., challenged the Delhi High Court’s order that allowed compounding of the offence without their consent.
The dispute began when A.S. Pharma Pvt. Ltd. initiated legal proceedings against Nayati Medical Pvt. Ltd. and others after two cheques amounting to Rs. 6,50,000, dated January 19, 2020, and February 9, 2020, were dishonored. The appellant filed a complaint under Section 138 of the N.I. Act, which makes the dishonor of a cheque for insufficiency of funds a punishable offence. Upon receiving the summons, the respondents expressed their willingness to settle the matter and requested compounding of the offence under Section 320 of the Code of Criminal Procedure, 1973 (Cr.P.C.), which was denied by the Trial Court.
Aggrieved by the Trial Court’s decision, the respondents approached the Delhi High Court, which invoked its inherent powers under Section 482 of the Cr.P.C. and compounded the offence, even without the complainant’s consent. This order was subsequently challenged by the complainant in the Supreme Court.
Legal Issues Involved
The core legal issue before the Supreme Court was whether the High Court could compound an offence under Section 138 of the N.I. Act without the complainant’s consent by exercising its inherent powers under Section 482 of the Cr.P.C. combined with Section 147 of the N.I. Act. Section 147 of the N.I. Act states that offences under the Act are compoundable, but the question was whether this provision allowed compounding without the consent of the complainant.
Supreme Court’s Decision
The Supreme Court bench, comprising Justice C.T. Ravikumar and Justice Sanjay Karol, set aside the Delhi High Court’s order, holding that the compounding of an offence under Section 138 of the N.I. Act cannot be done without the consent of the complainant. The Court emphasized that Section 147 of the N.I. Act allows compounding, but it does not override the fundamental requirement that the complainant’s consent is necessary.
Quoting from the judgment, the Court observed:
“An offence under Section 138, N.I. Act could be compounded under Section 147 thereof, only with the consent of the complainant concerned.”
The Court further clarified that the inherent powers under Section 482 of the Cr.P.C. should be exercised sparingly and cannot be used to bypass statutory provisions that mandate consent for compounding.
Key Observations by the Supreme Court
– Requirement of Consent: The Court reaffirmed that the legislative intent behind Section 147 of the N.I. Act is clear in requiring the consent of the complainant for compounding offences. It noted that, unlike other criminal proceedings, offences under Section 138 involve a financial transaction where the complainant has a vested interest, and thus, their consent is crucial.
– Distinction Between Quashing and Compounding: The Supreme Court made a clear distinction between “quashing” a case and “compounding” an offence. It observed that, “Quashing of a case is different from compounding. In quashing, the Court applies it but in compounding, it is primarily based on consent of the injured party.”
– Misuse of Powers under Section 482, Cr.P.C.: The bench also highlighted that the inherent powers of the High Court under Section 482, Cr.P.C., are meant to prevent abuse of the court’s process and to secure the ends of justice, but not to override specific statutory mandates.
The Supreme Court quashed the Delhi High Court’s decision to compound the offence under Section 138 of the N.I. Act without the complainant’s consent. However, it acknowledged that the respondents had deposited the cheque amount of Rs. 6,50,000 with 12% simple interest per annum, along with an additional sum of Rs. 1,00,000, as directed by the High Court. Considering these circumstances, the Supreme Court invoked its powers under Article 142 of the Constitution of India to “do complete justice” and quashed the complaint and all related proceedings.
The Court allowed the complainant to withdraw the deposited amount, reiterating that this ruling was specific to the facts of the case and should not be generalized.
The appellant, A.S. Pharma Pvt. Ltd., was represented by a legal team comprising Mr. Vimit Trehan, Mr. Dhruv Dwivedi, and Mr. Ravi Bharuka. The respondents, Nayati Medical Pvt. Ltd. and others, were represented by Mr. Giriraj Subramanium, Mr. Simarpal Singh Sawhney, Mr. Siddhant Juyal, and other counsels.
